Physicians are busy people. Through much of your career you are working to pay off student debt while trying to save for retirement and other needs. These concerns make investing and financial planning an important part of your life.
Explore This IssueJuly 2019
“The best way to think about investing is that there are two components,” said Cynthia Chen, MD, a pediatric otolaryngologist at Nemours Children’s Hospital in Orlando. “One is protecting yourself using investments to shield from liability. The other is to increase your wealth.”
Dr. Chen says it is important to start early and maximize all of your tax-advantaged options. During residency and fellowships, your income is probably low enough to use Roth IRAs. At retirement, you can take out your money tax free. For attending physicians, maximize your 401(k) or 403(b) plans. If you have children, look into 529 plans to cover educational costs.
Investing Is a Part of Personal Finance
“The truth is that probably 90% of what I do is not traditional investing, but personal finance: how to live on a budget, how to pay down your student loans, making sure you don’t pay too much for a house,” said James M. Dahle, MD, founder of The White Coat Investor, a website devoted to financial issues physicians face. “I also make sure that your assets and family are protected.”
Finding a person to help you with these decisions is an important first step.
“People think of financial advisors (FA) like they think of doctors,” said W. Ben Utley, CFP, a financial advisor at Physician Family Financial Advisors in Eugene, Ore. “You get sick, you see a physician, you get a pill, and you go away until the next time. [And], like physicians, a FA can help with preventing problems.”
Many physicians have stocks and bonds in taxable accounts. This can be a poor decision. Tax-advantaged accounts such as a 401(k) or 503(b) allow you to grow your money with no taxes until you take funds out later in life.
Maximize Employer Match for Free Money
“You are leaving the most money on the table by not taking advantage of employer matches of your contribution,” said Utley. “This is free money, and you want to get all you can. Over the course of your career, it can add a substantial amount to your retirement funds.”
Most can put up to $19,000 a year into these accounts. The amount of contribution matched differs from one employer to the next. However, there are reasons to put in the maximum contribution even if your employer doesn’t kick in any more.